Welspun buys 35% stake in Australian firm for Rs470 crore

Welspun buys 35% stake in Australian firm for Rs470 crore

Mumbai: Welspun Infra Projects Pvt. Ltd, a fully owned subsidiary of oil pipeline maker Welspun group, will purchase a 35% stake in Australian Leighton group’s Indian subsidiary, Leighton Contractors (India) Pvt. Ltd, for 470 crore.

The company will be renamed as Leighton Welspun Pvt. Ltd and will pursue infrastructure opportunities in India and regional markets, including Sri Lanka.

Leighton, which has a presence in Malaysia, India, Singapore, Sri Lanka and Brunei, has built an offshore refinery for oil marketing company Hindustan Petroleum Co. Ltd at Visakhapatnam, Andhra Pradesh; and the Indore-Khalghat Highway road under the North-South corridor for National Highway Authority of India (NHAI). It also constructed Motorola India Pvt. Ltd’s manufacturing facility at Sriperumbudur near Chennai.

“As Welspun continues to expand, we foresee great potential in the $500 billion Indian infrastructure sector and other neighbouring countries," Welspun chairman B.K. Goenka said, adding the group will look forward to this strategic partnership as a catalyst for growth.

The deal is expected to be completed in 90 days.

“Having a strategic partner like Welspun, which has strong interest in developing infrastructure projects, complements Leighton’s extensive project development and delivery experience in India and internationally," said David Savage, Leighton Holdings’ chief operating officer, in a statement.

“Our partnership with Welspun will allow us to bid very competitively for the upcoming infrastructure work that India plans to execute," he added.

While Leighton has a good consultancy business, Welspun brings execution capability to the table. “Leighton will help Welspun maintain its share in the turnkey projects space," said Dhirendra Tiwari, senior vice-president, research (engineering and construction), at Motilal Oswal Securities Ltd, a Mumbai-based brokerage. “The joint venture will help both the companies qualify for the government projects for having necessary net worth and technical capabilities. Such projects have very stringent requirements for the contractors and the joint ability of both the firms will give them the edge," Tiwari added.

With both Leighton Contractors and Welspun Infra Projects being unlisted firms, not too many analysts keep track of them.

India’s core sector rose by 7% in October from a year ago, according to the data released by the Union ministry of commerce and industry. The Planning Commission has projected that investment in the sector would almost double in the 12th Five-year plan (2012-17) from $514 billion in the 11th Plan (2007-12).

A Welspun Infra Projects spokesman said the company had through a combination of internal accruals and rupee loan funded the 470 crore cash buyout.

Shares of Welspun Corp. Ltd, the holding company of the group, rose 0.85% to close at 171.20 apiece on the Bombay Stock Exchange on Friday.

The joint venture agreement does not allow Welspun to hike its stake from 35%, the spokesman said. There was also no provision to induct another partner.

The group, with interests in home textiles, steel, steel pipes, infrastructure, and oil and gas sectors, is keen on more acquisitions. “We will continue to look at more such opportunities for inorganic growth in the future as well," the spokesman said.